Question 1: Answer: Additional Funds Required (AFN) is the amount a company must raise using external sources in order to finance the increased asset requirements to support the increased level of sales. Forecasting financial needs using AFN is simple because it uses simple company ratios that are assumed to be constant. The accounts payable of the company generally increase with sales, in the balance sheet the total assets will be equivalent to the total liabilities and equity, which indicates that the increase in assets must be equivalent to the total of liabilities and equity. So, increasing accounts payable will increase the amount of assets. Next comes the profit element which is essential for the distribution of dividends or for the repurchase of shares. Generally, stock repurchases are also considered cash dividends, the only difference is that the number of shareholders will decrease after the stock repurchase and the profit remains. will be used to purchase the company's assets. As the remaining profit will be transferred to retained earnings, which will increase the total liabilities and equity, this will in turn increase the assets. In this case, there is no dividend payment but the share buyback replaces it and the retention rate will also be affected with the share buybacks. AFN = Required increase in assets – Increase in spontaneous liabilities – Increase in retained earnings. In this case In this case, the third part of the increase in retained earnings will be affected by share repurchases, which is similar to the cash dividend, because the proportion of profit transferred to retained earnings will be less. In this case, the company will know the proportion of profits used for stock...... middle of paper ...... cash outflows are subtracted from the total sum of the present value of cash inflows. The NPV provides information about the monetary benefit obtained by the company by accepting a project. If the company has more projects with a higher NPV, the overall value of the company will increase. Since the return on investment will be higher, the overall return earned by investors will increase. When the company makes no announcement about the NPV of the projects, the investor can find information about the cost of the investment from the company's annual report and the cash flows generated by the project. In this case, the investor can use the company's WACC as the discount rate to determine the project's NPV by discounting the expected future profits of the company's projects. This will enable them to understand the benefits of the investment.